New Ways of Dispute Resolution in Investment Protection Cases

Abstract

The European Union, post-Lisbon, rose as a powerful new player in the field of treaty making when ‘Foreign Direct Investment’ in a shift from previous member state competence was included in exclusive EU competence as part of the common commercial policy (Article 207(1) TFEU). Those who expected that the European Union's appearance in the international arena would also radically alter the existing regime of dispute resolution apparently proved to be right. At least this is what transpires from the texts of the most recent free trade agreements to be entered into by the EU with Canada and the United States respectively, which envisage the set-up of a two-tier semi-permanent body for the resolution of disputes arising under the agreements. This novel dispute resolution system, which marks a clear break from the traditional investor-state dispute settlement mechanisms relying on treaty-based arbitration, understandably stands in the crossfire of heated professional debate and public attention. This is all the more so understandable when the European Commission shows the commitment to move towards establishing a permanent multilateral with an even wider-scale impact. This paper aims at presenting an in-depth analysis of the envisaged investment court system while examining, in contrast, the traits, shortcomings and legitimacy of traditional dispute settlement mechanisms applied in protection cases.